TaxTMI 
TaxTMI 
2025 (3) TMI 2220
X X X X Extracts X X X X
X X X X Extracts X X X X
....red to as "TPO") /the Hon'ble Dispute Resolution Panel (hereinafter referred to as "DRP") have erred in law, facts and circumstances of the case by completely ignoring the revised Form 3CEB filed by the appellant & rejecting the working under internal CUP method which reflected the correct position as per the law. 2. The learned TPO / DRP / AO have erred in law, facts and circumstances of the case by ignoring the fact that the benchmarking under internal CUP method results in NIL TP adjustment. 3. The learned DRP has erred in ignoring various judicial pronouncements wherein it is held that internal comparable transactions are to be preferred over the external transactions. comparable 4. The learned TPO / DRP / AO have erred in law, facts and circumstances of the case by making an adjustment of 13,77,54,756/- towards the interest paid on Non-Convertible Debentures. The learned AO has erred in law, facts and circumstances of the case by treating the said adjustment of 13,77,54,756/- as income of the appellant without considering that the appellant has suo moto disallowed same under section 94B of the Income Tax Act, 1961 & hence adding the same to the t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sultancy business support and port related services such as dredging, bathymetry study, geo technical and other kind of site investigations, port planning, equipment lease, manning services, etc., to entities engaged in port operation and was incorporated in 19.03.2016 under Companies Act, 2013, which is also a joint venture of Shapoorji Pallonji and Company Private Limited (holding 60% stakes in SPIS) and ESP Diabolical Private Limited (holding 40% stakes in SPIS). The assessee company had filed its return of income dated 15.03.2022, declaring total income at Rs. 1,43,080. The assessee's case was selected for scrutiny under CASS for following reasons: a. Very low PBDIT ratio in specific business code and turnover range where deficiency is reported in audit report. b. International Transaction(s) in respect of lending or borrowing of money (T.P. Risk Parameter). 5. Notices u/s. 143(2) and 142(1) were duly issued and served upon the assessee. The ld. AO observed that the assessee has entered into international transaction for which the same was referred to the Transfer Pricing Officer ('ld. TPO' for short) u/s. 92CA(1) of the Act, with respect to the lending or ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ation from the assessee as to why the Arm's length price of the interest rate as per TP Study Report @ 15.90% which was much lower than the actual interest paid at 17.18% should not be determined at Rs. 175,29,38,799/- as per the TP Study Report. The assessee contended that all three enterprises reported in form 3CEB will not fall under the preview of AEs as per Section 92A of the Act. The assessee further contended that as per Section 92A(2)(c) of the Act, only Credit Opportunities II PTE Limited shall be deemed to be an Associated Enterprise (AE) and the other 2 enterprises have been wrongly treated as AEs, where they do not exceed the prescribed limit of 51% as per the provisions and the same would fall under the category of independent enterprises and the rate of interest paid to them should be determined using internal CUP method. The assessee worked out the interest paid to AE (Credit opportunities II PTE Limited) as under: Date Days Interest @ 17.18% p.a. Repayment Outstanding Amount 31/03/2020 5,60,51,44,142 23/09/2020 176 44,47,69,563 16,89,27,123 5,88,09,86,581 23/03/2021 181 47,99,15,050 16,61,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....visions are independent and the disallowance made u/s. 94B could be carried forward for 8 assessment year immediately succeeding the assessment year for which the excess interest expenditure was computed. The ld. AO/TPO stated that the disallowance made during the year under consideration is allowable in the subsequent years and that it was beyond the powers of ld. TPO to decide the issue of disallowance which was to be decided only by the ld. AO. The ld. AO/TPO held that the Arm's length interest rate on the bonds issued by the assessee to its AEs was to be determined at 15.90% as per the TP study report of the assessee as against the actual payment made by the assessee at 17.18%. The ld. AO/TPO made an adjustment of Rs. 25,93,87,674/- towards the excess interest paid over and above the Arm's length interest rate by using CUP method. The ld. AO/TPO passed the draft assessment order, dated 01.11.2023, u/s. 144C(1) of the Act, against which the assessee filed its objection before the Hon'ble DRP, which disposed of the said objection giving partial relief to the assessee thereby proposing an adjustment of Rs. 13,77,54,756/-. Subsequent to which, the ld. AO passed the final assessment....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the Act and relied on various decision in support of the assessee's contentions. 11. The learned Departmental Representative (ld. DR for short) on the other hand controverted the said fact and stated that the assessee has not furnished any details to show that these entities are Non-AEs and further stated that in the TP Study Report and in the original form 3CEB, the assessee itself has treated all these three entities as its AEs. The ld. DR further stated that the ld. TPO has not considered the revised form 3CEB, for the reason that the same was filed after commencement of the TP proceeding. The ld. DR relied on the order of the lower authorities. 12. In the above factual matrix of the case, it is observed that Section 92A of the Act, categorizes the enterprises which would fall under the category of associated enterprises as per Sub Section 1 and deemed to be associated enterprises as stated in Sub Section 2 of the said provision. In the present case in hand, deemed associated enterprises would fall under clause (c), where when a loan is advanced by one enterprise to another enterprise, here in this case, the assessee being the borrower, where the quantum of the said loan ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r, it is observed that for the purpose of computing the disallowance u/s. 94B of the Act, prima facie the issue of whether an enterprise is an associated enterprise/deemed to be associated enterprise or an independent enterprise has to be determined before considering whether the transaction is at ALP. The assessee has claimed the benefit of Section 94B of the Act, in the absence of EBIDT details, which provides for restriction of interest payments made by the assessee to its AEs which should be restricted to 30% of the revenue before any interest, taxes, depreciation and amortization or interest paid to an associated enterprise whichever is less. The provision also facilitates carry forward of the interest expenditure for a maximum period of 8 years, only when the interest payments exceeds Rs. 1 crore and where the borrower is an Indian company or PE of a foreign company and the interest payment is made to Non-Resident associated enterprise as per Thin Capitalization Rule, where the intention of the legislature was to 'limit base erosion involving interest deduction and other financial payments' as per the initiative of the OECD adopting BEPS Action 4 recommendation. The proviso t....